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THE IMPACT OF WELFARE REFORM ON SCOTLAND Christina Beatty and Steve - - PowerPoint PPT Presentation
THE IMPACT OF WELFARE REFORM ON SCOTLAND Christina Beatty and Steve - - PowerPoint PPT Presentation
THE IMPACT OF WELFARE REFORM ON SCOTLAND Christina Beatty and Steve Fothergill CRESR, Sheffield Hallam University Four reports The Impact of Welfare Reform on Scotland (April 2013) The Local Impact of Welfare Reform (June 2014) The
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Housing Benefit: Local Housing Allowance Non-dependant deductions Household benefit cap Disability Living Allowance Incapacity benefits Child Benefit Tax Credits 1 per cent up-rating
The pre-2015 reforms
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Housing Benefit: Local Housing Allowance
50th to 30th percentile for setting rents in private sector
Cap on rents based on property size
Abolition of £15 ‘excess’ payments
Age limit for shared accommodation up from 25 to 35
CPI indexation
Non-dependant deductions
Higher deductions from HB to reflect contribution that non-dependant household members are expected to make to housing costs
The pre-2015 reforms (1)
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Household benefit cap
Cap on total payments to working-age claimants, set initially at £26,000 a year
Disability Living Allowance
Replacement of DLA by Personal Independence Payments
More stringent and regular medical test
Reduction in number of payment categories
The pre-2015 reforms (2)
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Incapacity benefits
Employment and Support Allowance (ESA) replacing previous benefits
Tougher medical test – Work Capability Assessment
Re-testing of existing claimants
New conditionality in Work-Related Activity Group
Time limiting of non-means tested benefit for ESA claimants in Work-Related Activity Group
Child Benefit
Three year freeze
Withdrawal from households with higher earner
The pre-2015 reforms (3)
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Tax credits
Adjustments to thresholds, withdrawal rates, supplements, income disregards and backdating
Changes to indexation and up-rating
Reduction in childcare element of WFTC
Increase in working hours requirement for WFTC
1 per cent up-rating
Up-rating by 1 per cent rather than CPI for three years for main working age benefits and LHA element of Housing Benefit
The pre-2015 reforms (4)
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Housing Benefit: under-occupation (‘Bedroom Tax’)
Arrangements to avert impact on claimants in Scotland
Council Tax Benefit
A hit for Scottish Government and local authorities, not claimants
Universal Credit
Essentially a re-packaging of existing benefits Not expected to result in net reduction in benefit entitlement Most of impact will be felt well beyond 2015
Income Support for lone parents
Transfer to JSA at same rates
RPI to CPI up-rating
Wider public sector accounting reform
Not included……
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July 2015 Budget announcements
Reductions in tax credits Lower Household benefit cap Lower ESA payments for claimants in work-related activity group Four-year freeze in most working age benefits National Living Wage Increased personal tax allowances
……..but will add some comments later
Not included……
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Treasury estimates of the overall financial saving arising from
each element of the pre-2015 reforms
Government Impact Assessments Benefit claimant numbers and expenditure, by local authority Additional official statistics DWP evidence from pilot schemes
Measuring the impacts
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- 1. The overall financial loss
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Overall financial loss, GB (updated)
Per working age adult £m p.a. (£ p.a.)
Tax Credits 4,210 105 Child Benefit 3,030 75 Disability Living Allowance 2,870 70 1 per cent uprating 2,700 70 Incapacity benefits 2,480 60 Housing Benefit: LHA 1,670 40 Housing Benefit: ‘bedroom tax’ 350 10 Council Tax Benefit 340 10 Non-dependant deductions 210 5 Household benefit cap 130 5 TOTAL 17,980 450
Source: Sheffield Hallam estimates based on official data
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Financial loss from pre-2015 reforms (£m per year) Tax Credits 350 Disability Living Allowance 320 Incapacity benefits 280 Child Benefit 240 1 per cent uprating 230 Housing Benefit: LHA 80 Non-dependent deductions 20 Household benefit cap 4 TOTAL 1,520
Source: Sheffield Hallam estimates based on official data
Overall financial loss, Scotland (updated)
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Loss (£m p.a,) Per working age adult (£ p.a.) North West 2,410 530 North East 890 525 Wales 1,010 520 London 2,750 490 Yorkshire and the Humber 1,610 475 West Midlands 1,670 470 Scotland 1,520 440 East Midlands 1,260 435 South West 1,390 420 East 1,440 385 South East 2,020 365 Great Britain 17,980 450
Overall financial loss by region (updated)
Source: Sheffield Hallam estimates based on official data
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Overall financial loss by district (updated)
Source: Sheffield Hallam estimates based on official data
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Scottish local authorities (updated)
Financial loss from pre-2015 reforms per working age adult £ p.a. Glasgow 580 W Lothian 460 Perth & Kinross 365 Inverclyde 570 Dumfries & G 450 Stirling 350 W Dunbarton 550 Midlothian 450 Eilean Siar 350 Dundee 540 Fife 440 Orkney 340 N Ayrshire 540 Falkirk 430 E Renfrewshire 340 N Lanarks 510 Argyll & Bute 410 Moray 340 Clackmannan 500 E Lothian 400 E Dunbarton 320 E Ayrshire 500 Angus 390 Aberdeen 300 Renfrewshire 480 Highland 385 Aberdeenshire 290 S Lanarks 470 Borders 380 Shetland 270 S Ayrshire 470 Edinburgh 370
Source: Sheffield Hallam estimates based on official data
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Overall estimated loss £m p.a. Glasgow 239 Aberdeen 46 Midlothian 24 Edinburgh 124 Falkirk 44 Argyll & Bute 22 N Lanarks 113 Dumfries & G 42 E Dunbarton 21 Fife 103 E Ayrshire 40 Stirling 21 S Lanarks 96 Perth & Kinross 34 Moray 20 Highland 56 S Ayrshire 33 E Renfrewshire 19 Renfrewshire 55 W Dunbarton 33 Clackmannan 17 W Lothian 53 Inverclyde 30 Eilean Siar 6 Dundee 52 Angus 28 Orkney 5 Aberdeenshire 47 Borders 27 Shetland 4 N Ayrshire 47 E Lothian 25
Source: Sheffield Hallam estimates based on official data
Scottish local authorities (updated)
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Less deprived More deprived
Relationship to deprivation (updated)
Sources: Sheffield Hallam estimates; 2012 Scottish Index of Multiple Deprivation
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Tax Credits
Source: Sheffield Hallam estimates based on official data
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1% uprating
Source: Sheffield Hallam estimates based on official data
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DLA
Source: Sheffield Hallam estimates based on official data
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Source: Sheffield Hallam estimates based on official data
Incapacity benefits
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Council Tax Benefit
Source: Sheffield Hallam estimates based on official data
20 + 10 to 20 0 to 10
£ per working age adult p.a. Greater London
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Housing Benefit: Bedroom Tax
Source: Sheffield Hallam estimates based on official data
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Housing Benefit: LHA
Source: Sheffield Hallam estimates based on official data
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Housing Benefit: Non-dependent deductions
Source: Sheffield Hallam estimates based on official data
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Benefit Cap
Source: Sheffield Hallam estimates based on official data
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Child Benefit
Source: Sheffield Hallam estimates based on official data
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- 2. The impact by ward
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Overall financial loss per adult of working age, £ per year Calton (Glasgow) 880 Garscadden (Glasgow) 690 Springburn (Glasgow) 780 Govan (Glasgow) 690 North East (Glasgow) 750 Baillieston (Glasgow) 680 Drumchapel (Glasgow) 740 East Centre (Glasgow) 680 Southside C (Glasgow) 730 North East (Dundee) 680 East End (Dundee) 730 The Lochs (Fife) 670 Shettleston (Glasgow) 720 Linn (Glasgow) 670 Buckhaven (Fife) 700 Paisley NW (Renfrew) 660 Canal (Glasgow) 700 Inverclyde N (Inverclyde) 660 East Central (Inverclyde) 690 Clydebank C (W Dunbarton) 660
Source: Sheffield Hallam estimates based on official data
Impact by ward – worst hit 20
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Overall financial loss per adult of working age, £ per year Meadows/M’side (Edinburgh) 220 Dunblane (Stirling) 210 Banchory (Aberdeenshire) 220 E Garioch (Aberdeenshire) 210 Bridge of Don (Aberdeen) 220 Westhill (Aberdeenshire) 210 Netherlee (E Renfrew) 220 Hazlehead (Aberdeen) 200 Newton M S (E Renfrew) 220 St Andrews (Fife) 180
Source: Sheffield Hallam estimates based on official data
Impact by ward – least hit 10
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Relationship to deprivation
Sources: Sheffield Hallam estimates and Scottish Indices of Deprivation 2012
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Glasgow
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Edinburgh
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Aberdeen
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Fife
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- 3. The impact by household type
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Housing Benefit: LHA (private rented sector)
Low-income households, mostly working age
Under-35s, mainly men
Large families
Non-dependant deductions
Low-income households with grown-up children living at home
Household benefit cap
Large out-of-work families in high rent areas
Disability Living Allowance
Less severely disabled of working age, mostly older, mostly out-of-work
New claimants initially, existing claimants from 2015 onwards
The groups typically most affected (1)
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Incapacity benefits
Out-of-work, mainly older adults with less severe health problems who are found ‘fit for work’
ESA claimants in the WRAG group – mainly older, ex-manual workers – who lose through means testing
Child Benefit
All households with children (a little)
Households with higher earners (a lot)
Tax Credits
Low-to-middle income families with children, including working households
Part-time workers on less than 24hrs a week
1 per cent up-rating
Everyone on the main working age benefits
The groups typically most affected (2)
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2011 Census
the number of households in 15 household types
districts and wards
Family Resources Survey
proportion of each household type receiving specific benefits
DWP Housing Benefit Data (SHBE)
Stat-Xplore
available by household sub-groups
Sheffield Hallam impacts of welfare reform
numbers affected and financial loss
districts and wards
Estimating cumulative impact on households
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Average financial loss £ p.a.
Pensioner couple 30 Single pensioner 40 Couple – no children 380 Couple – one dependent child 1,430 Couple – two or more dependent children 1,480 Couple- all children non-dependent 490 Lone parent – one dependent child 1,770 Lone parent – two or more dependent children 1,850 Lone parent – all children non-dependent 530 Single person household 490 Other – with one dependent child 1,410 Other – with two or more dependent children 1,500 Other – all full-time students Other – all aged 65+ 30 Other 490
Source: Sheffield Hallam estimates based on official data
Financial loss by household type
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Glasgow £ p.a. Edinburgh £ p.a.
Pensioner couple 30 30 Single pensioner 50 60 Couple – no children 520 300 Couple – one dependent child 1,830 1,380 Couple – two or more dependent children 1,900 1,420 Couple- all children non-dependent 540 320 Lone parent – one dependent child 2,280 1,720 Lone parent – two or more dependent children 2,360 1,880 Lone parent – all children non-dependent 720 450 Single person household 680 440 Other – with one dependent child 1,840 1,300 Other – with two or more dependent children 1,950 1,380 Other – all full-time students Other – all aged 65+ 30 30 Other 660 440
Source: Sheffield Hallam estimates based on official data
Financial loss – Glasgow & Edinburgh
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Approaching two-thirds (£960m a year) of the total financial loss
falls on households with dependent children
Around 40 per cent (£600m a year) falls on the sick or disabled
via DLA and incapacity benefit reform – and they lose from other reform too
Almost half (c. £730m a year) falls on in-work households
(NB. There is some overlap between these groups)
Impact on sub-groups
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- 4. The impact on the labour market
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Has welfare reform resulted in higher employment and lower unemployment?
Overall impact on Scottish labour market Cumulative impact of all the pre-2015 reforms First assessment anywhere in UK
Key question
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The Westminster Government uses two main arguments to justify welfare reform:
It saves the Treasury money, and reduces the budget deficit It encourages out-of-work claimants to find work, and claimants
in-work to seek more hours or find higher paid work If there’s no discernible positive impact on the labour market, the second argument falls
Why this matters
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Welfare reform is one of several things happening simultaneously
– economic upturn since 2012
Approach is based on big variation from place to place in financial
losses: If the welfare reforms are having an important impact on labour market outcomes it should be possible to observe a much greater impact in the places where the reforms hit hardest
Assessing the impacts
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Not all the pre-2015 reforms have come to full fruition yet
90% of loss from changeover from DLA to PIP 30% of loss from incapacity benefit reform
Not all the pre-2015 reforms likely to affect work incentives
Exclude removal of Child Benefit from higher earners
Practical complications
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Sources: DWP and Sheffield Hallam estimates
Out-of-work benefit claimant rate Feb 2011 - Nov 2014
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JSA ESA
JSA and ESA claimant rates Feb 2011 - Nov 2014
Sources: DWP and Sheffield Hallam estimates
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Grouping of authorities
Ayrshire: East Ayrshire, North Ayrshire, South Ayrshire Fife and Central: Clackmannanshire, Falkirk, Fife, Stirling Greater Aberdeen: Aberdeen, Aberdeenshire Greater Dundee: Dundee, Angus, Perth & Kinross Greater Edinburgh: Edinburgh, East Lothian, Midlothian, West Lothian Greater Glasgow: Glasgow, East Dunbartonshire, East Renfrewshire, Inverclyde, Renfrewshire, West Dunbartonshire Highlands & Islands: Argyll & Bute, Eilean Siar, Highland, Moray, Orkney, Shetland Lanarkshire: North Lanarkshire, South Lanarkshire Southern Scotland: Borders, Dumfries & Galloway
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Economic activity rate Employment rate ILO unemployment rate
Wider labour market variables 2011 - 2014
Sources: LFS and Sheffield Hallam estimates
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Jobs in each area late 2010 - late 2013
(1) Local authorities (2) Groups of local authorities
Sources: BRES and Sheffield Hallam estimates
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Bigger losses from welfare reform are associated with bigger falls
in the overall out-of-work claimant rate
But this relationship only applies to JSA, not ESA No observable relationship with labour market participation or
employment rates
No relationship with employment growth
So…….
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Feb 2011 – Nov 2014 Feb 1998 – Nov 2004 Aug 1993 – Aug 1996
Comparisons between upturns
Sources: DWP and Sheffield Hallam estimates
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Bigger than average reductions in JSA numbers in areas of high
unemployment are a normal feature of economic upturns
So the big reductions in JSA unemployment since 2011 in a
number of Scottish local authorities cannot be attributed to welfare reform
Which all means…..
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GDP Employment
Comparison of recessions and recoveries
Sources: ONS, LFS
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On balance, the evidence provides little support for the view that welfare reform is having important and positive impacts on the labour market in Scotland
The labour market impact
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Final comments
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Reductions in tax credits Lower household benefit cap Lower ESA payments for claimants in work-related activity group Four-year freeze in most working-age benefits
In all, £12bn a year of new welfare benefit cuts Further big financial losses to claimants in Scotland (£1bn+ p.a.) But why should these new cuts have any greater positive impact on the labour market?
The new cuts in welfare
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